GKN has rejected Melrose's final bid

GKN has rejected Melrose's final bid

Kerry Wise
March 15, 2018

Melrose Industries PLC raised its hostile bid for GKN PLC by 9 percent in a last-ditch attempt to woo shareholders to its buyout proposal and reject a competing plan by the United Kingdom engineering firm to break itself up.

Melrose is now offering 467p per share, and has also raised the amount GKN shareholders will own from 57% to 60%.

"We have recently made attempts to engage in constructive discussion with the GKN board with a view to agreeing the terms of a recommended offer", Melrose said in the letter to shareholders.

GKN's board unanimously rejected the new bid on Monday saying it continued to fundamentally undervalue the company. The move came after the blue-chip company agreed a deal last week to merge its automotive division with Dana.

But Melrose declared its sweetened offer as "final", meaning it can not improve the terms further under British takeover rules. No sooner does GKN pop up with another 52 pages imploring investors to "reject the Melrose offer" than guess what?

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"The robust efforts GKN has taken to protect itself from the hostile bid, including the proposed disposal of its Driveline business to Dana, combined with the comments from Melrose that their offer will "not be increased under any circumstances" is leading investors to conclude that GKN has won this battle, at least for now".

That will include considering whether they want to hold a stake in New York-listed Dana or London-listed Melrose. GKN shareholders will need to approve the merger, which means they will have to weigh its merits against a Melrose deal. The dividend included in Melrose's offer, it said, has already been earned by GKN shareholders.

The increased bid values the company at 467 pence a share, up from the 430.1-pence original proposal, Birmingham, England-based Melrose said in a statement Monday.

Well, more than you might think, from the share price reaction: GKN shares down 2.5 per per cent to 424¼p, Melrose down 5 per cent to 213½p.

GKN's chairman, Mike Turner, wrote to investors on Monday to point out that Melrose "lacks experience in several critical areas and that its priorities are inappropriate for running a global technology-based business like GKN".